Trading emini futures or futures contracts in general attracts many would-be traders. This is partly due to the enormous leverage they offer. To understand what this means, sometimes all you have to do to manage a single emini lot is deposit $500. Now, obviously this is usually enough to cover the minimum margin. You will need to deposit a little more to actually trade, but relatively not much more. I think 2nd time would be fine.
Now let’s assume you already have a lot of money in your futures account with a broker who has set their Eminiday trading margin to just $500. Let's also assume that the instrument you want to trade is ES, an emini contract on the S&P 500. One pip of this instrument is worth $50 and the current price (April 2007) is around 1450, so it's easy to see how much the dollar is worth. Value you can control with $1000. Simply put, 50 * $1,450 = $72,500. That's right: a paltry $1,000 (or even $500 in theory) can control up to $72,500!
Now, if you have a margin account, you can control up to $2,000 in stock value with the same amount ($1,000). This is how futures contracts provide significant leverage. This is enormous compared to almost all other trading instruments except currency pairs, where leverage can actually be greater, and spread betting, which offers similar power to leverage.
Obviously, it is important to remember that this high leverage is a double-edged sword and must be used wisely. What this means for most traders is that they should simply stick with the stock.
